Hacienda Luisita Inc. (HLI) v.

Presidential Agrarian Reform Council (PARC), et

al.,G.R. No. 171101, July 5, 2011,
Facts
In 1958, Tarlac Development Corporation (Tadeco), assisted by the Central Bank of the
Philippines, purchased Hacienda Luisita and the Central Azucarera de Tarlac, the sugar mill
of the hacienda, from the Spanish owners of Compaia General de Tabacos de Filipinas
(Tabacalera). Tadeco was then owned and controlled by the Jose Cojuangco Sr. Group. Also,
the GSIS extended a PhP5.911 million loan in favor of Tadeco to pay the pesoprice
component of the sale, with the condition that the lots comprising the Hacienda Luisita be
subdivided by the
applicant-corporation and sold at cost to the tenants, should there be any, and whenever
conditions should exist
warranting such action under the provisions of the Land Tenure Act.
Tadeco however did not comply with this condition. On May 7, 1980, the martial law
administration filed a suit before the Manila RTC against Tadeco, et al., for them to
surrender Hacienda Luisita to the then Ministry of Agrarian Reform (MAR) so that the
land can be distributed to farmers at cost. Tadeco alleged that Hacienda Luisita is not
covered by existing agrarian reform legislations for it does not have tenants. The
argument did not convince the Manila RTC, thus rendered judgment ordering Tadeco to
surrender Hacienda Luisita to the MAR. Tadeco appealed the case to the CA.
On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the
governments case
against Tadeco, et al. By Resolution of May 18, 1988, the CA dismissed the case the
Marcos government initially instituted and won against Tadeco, et al. The dismissal action
was, however, made subject to the obtention by Tadeco of the PARCs approval of a stock
distribution plan (SDP) that must initially be implemented after such approval shall have
been secured. On August 23, 1988, Tadeco organized a spin-off corporation, herein
petitionerHLI, as vehicle to facilitate stock acquisition by the farmworkers. For this
purpose, Tadeco conveyed to HLI theagricultural land portion (4,915.75 hectares) and
other farm-related properties of Hacienda Luisita in exchange forHLI shares of stock.On
May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of
Hacienda Luisita signified in a referendum their acceptance of the proposed HLIs Stock
Distribution Option Plan (SODP). On May 11,1989, the SDOA was formally entered into by
Tadeco, HLI, and the 5,848 qualified FWBs. This attested to by then DAR Secretary Philip
Juico. The SDOA embodied the basis and mechanics of HLIs SDP, which was eventually
approved by the PARC after a follow-up referendum conducted by the DAR on October 14,
1989, in which 5,117FWBs, out of 5,315 who participated, opted to receive shares in HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda
from agricultural to industrial use, pursuant to Sec. 65 of RA 6657. The DAR approved the
application on August 14, 1996, subject to payment of three percent (3%) of the gross
selling price to the FWBs and to HLIs continued compliance with its undertakings under
the SDP, among other conditions. On December 13, 1996, HLI, in exchange for
subscription of12,000,000 shares of stocks of Centennary Holdings, Inc. (Centennary),
ceded 300 hectares of the converted area to the latter. Consequently, HLIs Transfer
Certificate of Title (TCT) No. 287910 was canceled and TCT No.292091 was issued in the
name of Centennary. HLI transferred the remaining 200 hectares covered by TCT
No.287909 to Luisita Realty Corporation (LRC) in two separate transactions in 1997 and
1998, both uniformly involving100 hectares for PhP 250 million each. Subsequently,
Centennary sold the entire 300 hectares for PhP750 millionto Luisita Industrial Park
Corporation (LIPCO), which used it in developing an industrial complex. Later,
LIPCOtransferred these 2 parcels to the Rizal Commercial Banking Corporation (RCBC) in
payment of LIPCOs PhP431,695,732.10 loan obligations to RCBC. LIPCOs titles were
cancelled and new ones were issued to RCBC.
Apart from the 500 hectares, another 80.51 hectares were later detached from Hacienda
Luisita and acquired by the government as part of the Subic-Clark-Tarlac Expressway
(SCTEX) complex. Thus, 4,335.75 hectares remained ofthe original 4,915 hectares Tadeco
ceded to HLI.Such, was the state of things when two separate petitions reached the DAR in
the latter part of 2003. Thefirst was filed by the Supervisory Group of HLI (Supervisory
Group), praying for a renegotiation of the SDOA, or, inthe alternative, its revocation. The
second petition, praying for the revocation and nullification of the SDOA and
thedistribution of the lands in the hacienda, was filed by
Alyansa ng mga Manggagawang Bukid ng HaciendaLuisita
(AMBALA). The DAR then constituted a Special Task Force (STF) to attend to issues
relating to the SDP ofHLI. After investigation and evaluation, the STF found that HLI has

not complied with its obligations under RA 6657despite the implementation of the SDP. On
December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01,
recalling/revoking the SDO plan of Tadeco/HLI. It further resolved that the subject lands be
forthwith placed under the compulsory coverage or mandated land acquisition scheme of
the CARP. From the foregoing resolution, HLI sought reconsideration. Its motion
notwithstanding, HLI also filed a petition before the Supreme Court in light of what it
considers as the DARs hasty placing of Hacienda Luisita under CARP even before PARC
could rule or even read the motion for reconsideration. PARC would eventually deny HLIs
motion for reconsideration via Resolution No. 2006-34-01 dated May 3, 2006.
II.
Issues
(1) Is Sec. 31 of RA 6657, which allows stock transfer in lieu of outright land transfer,
unconstitutional?
(2) Did PARC gravely abuse its discretion in revoking the subject SDP and placing the
hacienda under CARPs
compulsory acquisition and distribution scheme?
(3) Did the PARC gravely abuse its discretion when it included LIPCOs and RCBCs
respective properties that once formed part of Hacienda Luisita under the CARP
compulsory acquisition scheme via the assailed Notice of Coverage ?
III.
Ruling
(1)NO, Sec. 31 of RA 6657 is not unconstitutional.
The Court actually refused to pass upon the constitutional question because it was not
raised at the earliest opportunity and because the resolution thereof is not the lis
mota of the case. Moreover, the issue has been rendered moot and academic since
SDO is no longer one of the modes of acquisition under RA 9700.While there is indeed
an actual case or controversy, it took FARM some eighteen (18) years from November21,
1989 before it challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late
already. The FARM members slept on their rights and even accepted benefits from the SDP
without even a complaint on the alleged unconstitutionality of Sec. 31 upon which the
benefits were derived. The Court cannot now be goaded into resolving a constitutional
issue that FARM failed to assail after the lapse of a long period of time and the occurrence
of numerous events and activities which resulted from the application of an alleged
unconstitutional legal provision. Furthermore, the lis mota is whether or not PARC acted in
grave abuse of discretion when it ordered the recall of the SDP for such non-compliance
and the fact that the SDP, as couched and implemented, offends certain constitutional and
statutory provisions. Any of these key issues may be resolved without plunging into the
constitutionality of Sec.31 of RA 6657.By virtue of Sec. 5 of RA 9700, the stock distribution
scheme under Sec. 31 of RA 6657 is no longer an available option under existing law; thus
the question of unconstitutionality should be a moot issue.
(2) NO, the PARC did not gravely abuse its discretion in revoking the subject
SDP and placing the hacienda under CARPs compulsory acquisition and
distribution scheme
The revocation of the approval of the SDP is valid: (1) the mechanics and timelines of HLIs
stock distribution violate DAO 10 because the minimum individual allocation of each
original farm worker-beneficiaries (FWBs) of 18,804.32 shares was diluted as a result of the
use of man days and the hiring of additional farmworkers; (2) the 30-year timeframe for
HLI-to-FWBs
stock
transfer
is
contrary
to
what
Sec.
11
of
DAO
10
prescribes. As explained by HLI, a beneficiary needs to work for at least 37 days in a fiscal
year before he or shebecomes entitled to HLI shares. If it falls below 37 days, the FWB,
unfortunately, does not get any share at yearend. The number of HLI shares distributed
varies depending on the number of days the FWBs were allowed to work in one
year. Worse, HLI hired farm workers in addition to the original 6,296 FWBs, such that, as
indicated in the Compliance dated August 2, 2010 submitted by HLI to the Court, the total
number of farm workers of HLI as of said date stood at 10,502. All these farm workers,
which include the original 6,296 FWBs, were given shares out of the118,931,976.85 HLI
shares representing the 33.296% of the total outstanding capital stock of HLI. Clearly, the
minimum individual allocation of each original FWB of 18,804.32 shares was diluted as a
result of the use of mandays and the hiring of additional farm workers.Par. 3 of the SDOA
expressly provides for a 30-year timeframe for HLI-to-FWBs stock transfer is an
arrangement contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the
implementation of the approved stock distribution plan within three (3) months from

receipt by the corporate landowner of the approval o fthe plan by PARC. Evidently, the land
transfer beneficiaries are given thirty (30) years within which to pay the cost of the land
thus awarded them to make it less cumbersome for them to pay the government .DAO 10,
having the force and effect of law, must be duly complied with; therefore, PARC is correct
in revoking the SDP.
(3) YES, those portions of the converted land within Hacienda Luisita that RCBC
and LIPCO acquired by purchase should be excluded from the coverage of the
assailed PARC resolution.
It can rightfully be said that both LIPCO and RCBC, adduced from their foregoing actions,
are purchasers in good faith for value, so entitled to the benefits arising from such status.
First, at the time LIPCO purchased the entire three hundred (300) hectares of industrial
land, there was no notice of any supposed defect in the title of its transferor, Centennary,
or that any other person has a right to or interest in such property. The same is true with
respect to RCBC. To be sure, intervenor RCBC and LIPCO knew that the lots they bought
were subjected to CARP coverage by means of a stock distribution plan, as the DAR
conversion order was annotated at the back of the titles of the lots they
acquired. However, they are of the honest belief that the subject lots were validly
converted to commercial or industrial purposes and for which said lots were taken out of
the CARP coverage subject of PARC Resolution No. 89-12-2 and hence, can be legally and
validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows conversion and
disposition of agricultural lands previously covered by CARP land acquisition after the
lapse of five (5) years from its award when the land ceases to be economically feasible
and sound for agricultural purposes or the locality has become urbanized and the land will
have a greater economic value for residential, commercial or industrial purposes.
And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value.
Undeniably, LIPCO acquired 300 hectares of land from Centennary for the amount of PhP
750 million pursuant to a Deed of Sale dated July 30, 1998. On the other hand, in a Deed
of absolute Assignment dated November 25, 2004, LIPCO conveyed portions of Hacienda
Luisita in favor of RCBC by wayof dacion en pago to pay for a loan of PhP
431,695,732.10.Both RCBC and LIPCO cannot be considered at fault for believing that
certain portions of Hacienda Luisita are industrial/commercial lands and are, thus, outside
the ambit of CARP. The PARC, and consequently DAR, gravely abused its discretion when it
placed LIPCOs and RCBCs property which once formed part of Hacienda Luisita under the
CARP compulsory acquisition scheme.

Police Power Roxas and Co., Inc. vs Court of Appeals GR 127876, December 17, 1999
Facts:
This case involves three haciendas in Nasugbu Batangas owned by petitioner and the
validity of the acquisition of these by the government under RA 6657 or the
Comprehensive Agrarian Reform Law of 9188. Petitioner Roxas and Co. is a domestic
corporation and is the registered owner of three haciendas, namely Hacienda Palico,
Banilad and Caylaway. The events of this case occurred during the incumbency of then
President Aquino, in the exercise of legislative power, the President signed on July 22,
1987, Proclamation No. 131 instituting a Comprehensive Agrarian Reform Program and
Executive Order No. 229 providing the mechanisms necessary to initially implement the
program. Congress passed Republic Act No. 6657; the Act was signed by the President on
June10, 1988 and took effect on June 15, 1988. Before the laws effectivity, petitioner filed
with respondent DAR a voluntary offer to sell Hacienda Caylaway pursuant to the
provisions of EO No. 229.Haciendas Palico and Banilad were later placed under compulsory
acquisition by respondent DAR in accordance with the CARL.
Petitioner was informed that 1,023.999 hectares of its land in Hacienda Palico were subject
to immediate acquisition and distribution by the government under the CARL. Meanwhile
in a letter dated May 4, 1993, petitioner applied with the DAR for conversion of Haciendas
Palico and Banilad from agricultural to non-agricultural lands under the provisions of the
CARL. Despite petitioners application for conversion, respondent DAR proceeded with the
acquisition of the two Haciendas. The Land Bank of the Philippines trust accounts as
compensation for Hacienda Palico were replaced by respondent DAR with cash and LBP
bonds. On October22, 1993, from the title of the Hacienda, respondent DAR registered
Certificate of Land Ownership Award No. 6654. On October 30,1993, CLOAs were
distributed to farmer beneficiaries. On December18, 1991, the LBP certified certain
amounts in cash and LBP bonds had been earmarked as compensation for petitioners land
in Hacienda Banilad. On May 4, 1993, petitioner applied for conversion of both Haciendas
Palico and Banilad. Hacienda Caylaway was voluntarily offered for sale to the government
on May 6, 1988before the effectivity of the CARL. Nevertheless, on August 6,
1992,petitioner, through its President, Eduardo Roxas, sent a letter to the Secretary of
respondent DAR withdrawing its VOS of Hacienda Caylaway. The Sangguniang Bayan of
Nasugbu, Batangas allegedly authorized the reclassification of Hacienda Caylaway from
agricultural to non-agricultural. As a result, petitioner informed respondent DAR that it was
applying for conversion of Hacienda
Caylaway from agricultural to other uses. Respondent DAR Secretary informed petitioner
that a reclassification of the land would not exempt it from agrarian reform. On August 24,
1993, petitioner instituted a case with respondent DAR Adjudication Board praying for the
cancellation of the CLOAs issued by respondent DAR in the name of the farmers.
Petitioner alleged that the Municipality of Nasugbu, where the haciendas are located, had
been declared a tourist zone, that the land is not suitable for agricultural production, and

that the Sangguniang Bayanof Nasugbu had reclassified the land to non-agricultural.
Respondent DARAB held that the case involved the prejudicial question of whether the
property was subject to agrarian reform; hence, this question should be submitted to the
Office of the Secretary of Agrarian Reform for determination. Petitioner filed a petition with
the CA. It questioned the expropriation of its properties under the CARL and the denial of
due process in the acquisition of its landholdings. Meanwhile, the petition for conversion of
the three haciendas was denied. Petitioners petition was dismissed by the CA. Hence, this
recourse.
Issue:
Whether or not the acquisition proceedings over the haciendas were valid and in
accordance with the law.
Held:
No, for a valid implementation of the CAR Program, two notices are required first the
Notice of Coverage and letter of invitation to a preliminary conference sent to the
landowner, the representatives of the BARC, LBP, farmer beneficiaries and other interested
parties and second, the Notice of Acquisition sent to the landowner under Section 16 of
the CARL. The importance of the first notice, the Notice of Coverage and the letter of
invitation to the conference, and its actual conduct cannot be understated. They are steps
designed to comply with the requirements of administrative due process. The
implementation of the CARL is an exercise of the States police power and the power of
eminent domain. To the extent that the CARL prescribes retention limits to the landowners,
there is an exercise of police power for the regulation of private property in accordance
with the Constitution. But where, to carry out such regulation, the owners are deprived of
lands they own in excess of the maximum area allowed, there is also a taking under the
power of eminent domain. In this case, respondent DAR claims that it sent a letter of
invitation to petitioner. corporation, through Jaime Pimentel, the administrator of Hacienda
Palico but he was not authorized as such by the corporation. The SC stressed that the
failure of respondent DAR to comply with the requisites of due process in the acquisition
proceedings does not give the SC the power to nullify the CLOAs already issued to the
farmer beneficiaries. The Court said, to assume the power is to short-circuit the
administrative process, which has yet to run its regular course. Respondent DAR must be
given the chance to correct its procedural lapses in the acquisition proceedings. In
Hacienda Palico alone, CLOA's were issued to 177 farmer beneficiaries in 1993. Since then
until the present, these farmers have been cultivating their lands. It goes against the basic
precepts of justice, fairness and equity to deprive these people, through no fault of their
own, of the land they till. The petition is granted in part and the acquisition proceedings
over the three haciendas are nullified for respondent DAR's failure to observe due process.